Last Wednesday’s Fed minutes release suggesting a stepped up tapering schedule combined with uncertainty over the impact of the Omicron virus variant created a mini panic by investors. While the pullbacks created some damage to major indexes, we continue to believe the longer-term outlook for stocks remains positive. Near-term however, we expect markets to remain mixed and vulnerable to any significant negative news surrounding the impacts of the Omicron variant
- The Russell 2000 is breaking down and is near 52-week RS lows vs. the S&P 500. IWM is near a support level near Friday’s low near the 220 level. A break back above the 234.50 level would provide for a bullish outlook
- S&P 500. The S&P 500 has support at Friday’s low of 4585 and the breakout level near 4545. We believe the markets will remain mixed until concerns of the Omicron mutation can be ascertained.
- Treasury bonds. 10-year Treasury yields remain above the 1.4% support level and 30-year remains above support at 1.76%. As long as the following support levels hold, we believe that a positive backdrop for the markets exists. We believe the pullback in banks and thrifts also remains constructive.
- Crude Oil. Despite last week’s dramatic decline, crude oil prices remain above the 200-day moving average at 69.77 and may provide for a good entry. Historically the opening of the SPR is a short-term solution to a much larger problem. The sudden decline in oil prices are likely due to concern over the impact of the Omicron virus is likely to have on travel .
- Defensives continue to underperform. XLP (Cons Staples) vs XLY (Cons. Cylicals) remains near multi-year lows. XLU (Utilities) remain near RS lows vs the S&P 500…
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